THE LOCAL EXCHANGES ADMIT THEIR PROBLEMS The BSE and Sibex say that they will align to the European directives

• According to the CNVM, "deal" trades on the BSE and "Iceberg"-type orders on Sibex do not comply with the MiFID

The representatives of the two domestic exchanges, of Bucharest and Sibiu, told us that they will comply with the European directives, after Gabriela Anghelache, the president of the National Securities Commission (CNVM), told us, in an interview, that "deal" trades on the BSE and the "Iceberg" orders on Sibex do not comply with the MiFID (the Directive for the Financial Instruments Market).

The Commission has made the commitment to the ESMA (European Securities and Markets Authority) to amend these practices by May 1st, in order to have them comply with the European regulations.

Alin Barbu, the interim general manager of the Bucharest Stock Exchange, told us that the "deal" market of the BSE is set to begin compliance with the requirements of the MiFID, as the BSE has already taken action towards that goal.

He said: "Compliance of the «deal» trades with the stipulations of the European regulations, both on the Bucharest Stock Exchange, as well as on other similar exchanges, is done according to the provisions of article 20 of the Regulations of the European Commission 1287/2006".

Alin Barbu explained that whereas until now, a "deal" trade had a maximum upper limit of 700,000 lei, after becoming compliant with the European provisions, this limit will vary according to various categories, depending on the average turnover.

Cristian Sima, the chairman of Sibex, admits that "iceberg" orders do not comply with the European provisions.

He did however insist that issues arise only on spot trades, and that derivatives trades comply with European regulations, as they have a market maker.

"Mrs. Anghelache is right, «iceberg» orders do not comply with European regulations, but so far there have been no problems because the volumes of these trades are very small, Mr. Sima said, who added: "Besides, this is nothing compared to the millions of issues which the CNVM has yet to solve. If there is indeed a desire to align with the European standards, the Commission should first of all start by cleaning up its own house".

According to the CNVM, "iceberg" orders are in fact "hidden"-type orders. The seller or the buyer has the option of displaying part of the volume they want to trade in the market, as the remaining volume of the trading order is "hidden" from the other participants.

Gabriela Anghelache said that at the moment, these orders are not compliant with the provisions of the EC regulation no. 1287/2006 because, after the sale of the visible volume, the new order which is displayed in the market does not have a new "timestamp", as it is introduced in the system with the same execution priority as the initial order. Thus, as the iceberg order benefits from the priority initially received, orders placed after the initial iceberg order are placed at a disadvantage, and will only be considered for execution after the "iceberg" order of which a part has already been executed. The change for this type of order will consist of the allocation of a new "timestamp" for it after each partial execution of the visible quantity.